TRENTON - After months of hearing that New Jersey's finances are a disaster, state leaders Tuesday found themselves in the surprising position of discussing how to spend an unexpected windfall of state tax revenue.
Gov. Christie's administration wants to increase a payment to the state's troubled pension fund and raise property tax rebates with what it says will be an additional $511 million in tax revenue estimated for the last six weeks of fiscal 2011 and all of fiscal 2012.
That figure was presented by Treasurer Andrew Sidamon-Eristoff to the Assembly Budget Committee on Tuesday, as part of a revenue forecast updated following April tax collections from numbers Christie used to propose the $29.4 billion state budget.
A budget officer for the nonpartisan Office of Legislative Services delivered an even rosier assessment to legislators earlier in the day, forecasting revenues $913 million higher than those contained in the governor's February budget message.
David Rosen, the OLS budget officer, attributed the uptick in revenues to wealthy residents earning more as the stock market improved. He said that led to a higher-than-expected surge last month in income tax collections, which are mostly supported by millionaires.
He said that the loss of income for that group during the earlier years of the economic downturn, when the stock market was suffering, had "sunk" New Jersey's tax collections.
The legislative office's projection of an additional $1.4 billion in income taxes was offset by expectations that corporate business taxes and other revenues would fall more steeply.
New Jersey wasn't the only financially strapped state cheering this week: California now projects it will bring in $6.6 billion more than expected over the next two years, which will more than halve its budget deficit.
Noting California's situation, Rosen said April tax collections had caught forecasters in a number of places by surprise.
"When these volatile revenues move in one direction or the other, they tend to move much more rapidly, either up or down, than was anticipated," he said. "That process seems to be accelerating."
Sidamon-Eristoff told lawmakers that the $402 million difference in revenue projections by his office and OLS was not significant, given the overall size of the budget.
He also cautioned that the revised estimates were "not license to start spending again."
"We are a long way from being out of the woods with respect to our fiscal condition," the treasurer said.
Lawmakers have until the July 1 constitutional deadline to approve a budget for Christie to sign.
How the extra money should be spent hinges on a looming state Supreme Court decision that could order New Jersey to spend up to $1.6 billion more on education.
Asked why the administration's plans didn't reflect the possibility of a court order to spend more on education, the treasurer said, "Under the circumstances, it's prudent for us to plan in the absence of that kind of speculation and to set forth our priorities as an administration."
The administration and legislators on both sides of the aisle were mostly in agreement that, absent such a ruling, the money should be spent on property tax relief and the pension system. Some lawmakers also suggested the money be used to bolster the state's low surplus.
Sidamon-Eristoff said the administration wants to use the extra money to increase by 50 percent the $500 million pension contribution planned for fiscal 2011. The governor has said that he will make the payment, not due until next year, early on the condition that the Legislature approves his plans to fix the pension system.
The administration also wants to use the money to restore property tax rebates, which were eliminated in 2010. The budget restored a quarter of the rebates doled out in 2009 to be given as a credit on property tax bills this spring.
In February, Christie said he would double that amount if the Legislature adopted changes to save money on public health care that would include having public employees pay 30 percent of their health benefit costs.
Sidamon-Eristoff said Tuesday that the administration now will double rebates whether or not the Legislature adopted those changes, but would increase tax relief even further if lawmakers passed Christie's health benefits proposals.
If the proposals are passed, he said, the average property tax rebate for senior and disabled homeowners would rise from $540 to $810. Average property tax rebates for homeowners who are not seniors or disabled, and making up to $75,000 a year, would rise from $440 to $660.